With hope fading that Microsoft Corp.'s
MSFT -4.44%
new Windows 8 software will reignite computer sales, attention is
already shifting to the company's next big effort to regain relevance:
Windows Blue.
Microsoft has yet to formally define the software project. But Windows Blue is expected to mark a major change in the company's development methodology, replacing major launches of products every several years with frequent updates of features in operating software and applications such as Office.
That model is common in Internet services and apps, markets where Microsoft is determined to play a larger role. Some analysts think Windows Blue will help bring together efforts such as Windows 8—which is targeted at tablets and personal computers—and the Windows Phone software for smartphones.
"Windows 8 was about birthing a new model of applications, essentially a tablet model," said IDC analyst Al Hilwa. "Blue is the next milestone in this plan. It brings the phone and PC platform closer together and makes both more compelling."
The stakes for Windows Blue rose this week when two market research firms reported that shipments of PCs fell by double-digits percentages in the first three months of this year.
Figures from IDC and Gartner Inc.
IT +0.03%
released Wednesday showed Windows 8 hasn't spurred much demand for PCs
or tablets running the software. IDC leveled particularly harsh
criticism at the software, saying some consumers were turned off by its
touch-based interface.
The surprisingly steep drop—IDC called it the worst since it began releasing quarterly numbers for the software in 1994—caused a selloff in PC-related stocks Thursday. Microsoft's stock price slipped 4.9% Thursday afternoon to $28.82, after the company's stock price had touched a six-month high Wednesday.
A spokesman for Microsoft had no immediate comment Thursday.
Hewlett-Packard Co., HPQ -6.45% the largest PC maker and a major Microsoft customer, showed the steepest decline in shipments in the first quarter, with a 24% drop, according to IDC. H-P's stock fell 6.4% to $20.86 in recent trading.
But executives at Microsoft and partners such as Intel Corp. INTC -1.95% have acknowledged there is more work to do to encourage a wider array of touch-screen computing devices powered by Windows 8, and at lower price points.
Intel, which supplies microprocessors that serve as calculating engines in most PCs, is emphasizing a new line of battery-conserving chips that is known by the code name Haswell. The chips are expected to display much more sophisticated graphics and extend battery life on portable computers to eight to 10 hours.
Microsoft also has offered price breaks on its Windows software meant for a new class of simple PCs known as netbooks and seems to be responding to a market shift in consumer demand toward smaller tablets.
The company last year entered the market itself with the tablet known as Surface, just as products such as Apple Inc.'s AAPL -0.31% iPad Mini spurred demand for smaller models. Microsoft is now preparing a similarly small model with a seven-inch display, The Wall Street Journal reported Wednesday.
Executives at Intel and Microsoft have said they expect new computer chips and other advancements to drive down the cost of touch-screen laptops to as low as $500 or $600. For now, there are very few Windows 8 touch-screen computers on the market for less than $550.
Some on Wall Street aren't waiting for a new spark for PC and tablet demand. Analysts at Goldman Sachs GS -0.26% and Nomura Securities downgraded their recommendations on Microsoft shares on Thursday, contributing to a selloff in the company's shares.
Goldman said investors should sell Microsoft shares, while Nomura downgraded the stock to "neutral" from "buy."
"The combination of Windows 8's sluggish adoption and the absence of compelling new hardware have been disappointing, with no relief likely until later this year," Nomura analyst Rick Sherlund said in a research note. "We would be more hesitant in putting new money into the stock and prefer to sit on the sidelines and reassess the upgrade cycle as we go into the second half."
Goldman Sachs said Microsoft needed to do more to court consumers rather than the corporate customers that are Microsoft's major source of profits.
Microsoft has yet to formally define the software project. But Windows Blue is expected to mark a major change in the company's development methodology, replacing major launches of products every several years with frequent updates of features in operating software and applications such as Office.
That model is common in Internet services and apps, markets where Microsoft is determined to play a larger role. Some analysts think Windows Blue will help bring together efforts such as Windows 8—which is targeted at tablets and personal computers—and the Windows Phone software for smartphones.
"Windows 8 was about birthing a new model of applications, essentially a tablet model," said IDC analyst Al Hilwa. "Blue is the next milestone in this plan. It brings the phone and PC platform closer together and makes both more compelling."
The stakes for Windows Blue rose this week when two market research firms reported that shipments of PCs fell by double-digits percentages in the first three months of this year.
Shipments of personal computers have
plummeted in spite of Microsoft’s introduction of Windows 8 – which was
designed to make PCs appear more like tablets. As improvements in PC
technology become more incremental, consumers are increasingly
gravitating toward mobile devices.
The surprisingly steep drop—IDC called it the worst since it began releasing quarterly numbers for the software in 1994—caused a selloff in PC-related stocks Thursday. Microsoft's stock price slipped 4.9% Thursday afternoon to $28.82, after the company's stock price had touched a six-month high Wednesday.
A spokesman for Microsoft had no immediate comment Thursday.
Hewlett-Packard Co., HPQ -6.45% the largest PC maker and a major Microsoft customer, showed the steepest decline in shipments in the first quarter, with a 24% drop, according to IDC. H-P's stock fell 6.4% to $20.86 in recent trading.
But executives at Microsoft and partners such as Intel Corp. INTC -1.95% have acknowledged there is more work to do to encourage a wider array of touch-screen computing devices powered by Windows 8, and at lower price points.
Intel, which supplies microprocessors that serve as calculating engines in most PCs, is emphasizing a new line of battery-conserving chips that is known by the code name Haswell. The chips are expected to display much more sophisticated graphics and extend battery life on portable computers to eight to 10 hours.
Microsoft also has offered price breaks on its Windows software meant for a new class of simple PCs known as netbooks and seems to be responding to a market shift in consumer demand toward smaller tablets.
The company last year entered the market itself with the tablet known as Surface, just as products such as Apple Inc.'s AAPL -0.31% iPad Mini spurred demand for smaller models. Microsoft is now preparing a similarly small model with a seven-inch display, The Wall Street Journal reported Wednesday.
Executives at Intel and Microsoft have said they expect new computer chips and other advancements to drive down the cost of touch-screen laptops to as low as $500 or $600. For now, there are very few Windows 8 touch-screen computers on the market for less than $550.
Some on Wall Street aren't waiting for a new spark for PC and tablet demand. Analysts at Goldman Sachs GS -0.26% and Nomura Securities downgraded their recommendations on Microsoft shares on Thursday, contributing to a selloff in the company's shares.
Goldman said investors should sell Microsoft shares, while Nomura downgraded the stock to "neutral" from "buy."
"The combination of Windows 8's sluggish adoption and the absence of compelling new hardware have been disappointing, with no relief likely until later this year," Nomura analyst Rick Sherlund said in a research note. "We would be more hesitant in putting new money into the stock and prefer to sit on the sidelines and reassess the upgrade cycle as we go into the second half."
Goldman Sachs said Microsoft needed to do more to court consumers rather than the corporate customers that are Microsoft's major source of profits.
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